The human erbB-2 oncogene encodes a tyrosine kinase receptor. A ligand for the erbB-2 receptor (gp30), with an apparent molecular weight of 30,000, was reported to modulate the growth of cells overexpressing erbB-2. Whereas low concentrations of gp30 induced proliferation of these cells, higher concentrations inhibited their growth. To elucidate the cellular mechanisms underlying cell growth inhibition by gp30, we tested the effect of this ligand on cell growth and differentiation of the human breast cancer cells AU-565 and MDA-MB-453 (which overexpress erbB-2) and MCF-7 cells (which express low levels of this protooncogene). Ligand concentrations that inhibited growth in cells overexpressing erbB-2 induced apparent differentiation of cells with a more mature phenotype, i.e., with characteristics such as inhibited cell growth, altered cytoplasmic and nuclear morphology, and increased synthesis of milk components (casein and lipids). No significant effect of the ligand was observed in the human breast cancer cell line MCF-7. Concomitant with the induction of differentiation in AU-565 and MDA-MB-453 cells, the erbB-2 protein was translocated from membrane to the cytoplasm and perinuclear sites. These findings indicate that ligand-induced growth inhibition in cells overexpressing erbB-2 is associated with an apparent induction of differentiation.